You Credit Score- How's Your FICO?
Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan comes down to just one number.
Credit reporting agencies use your history of paying all types of loans in order to create your FICO score.
All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO score was developed by Fair Isaac and Company.
While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, the differences aren't huge; all of the agencies use the following factors to calculate your score:
- Credit History - Have you had credit for years, or for a short time?
- History of Payments - Do you pay your bills on time?
- Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
- Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?
These factors are assigned weights based on the formula being used. The result is one number. Credit scores range from 300 to 800. Higher is better. Most folks getting a mortgage in the current environment have a score above 620.
FICO makes a huge difference in interest rates
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.
Improving your score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the FICO score is based on your lifelong credit history, it's hard to change it quickly. You should, of course, appeal for the credit agency to remove any incorrect data from your credit report; this is the only "quick fix" for credit troubles.
Getting your FICO score
Before you can improve your credit score, you have to obtain your score and make sure that the credit reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. Also available are helpful information and tools that can help you understand how to improve your FICO score.
You can get a federally-mandated free credit report once per year from all three credit reporting agencies by visiting AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Want to know more about your FICO score? Give us a call: 9094671090.